|For the first time in four months, the cost of funds index headed lower.
COFI was 2.757% in December, the Federal Home Loan Bank of San Francisco reported Friday. COFI eased from 3.155% in November and was well below 4.072% a year earlier.
The index is calculated based on the interest expenses of member banks that are based in Arizona, California and Nevada. During December, the average total funds used in the calculation was $83.8 billion, higher than the $79.3 billion used in November's calculation but a far cry from $375.6 billion in August.
COFI is used as an index for adjustable-rate mortgages, which accounted for 2.4% of applications tracked in the Mortgage Bankers Association in its Weekly Mortgage Applications Survey for the week ending Jan. 23.
Another ARM index is the six-month London Interbank Offered Rate, which Bankrate.com reported at 1.68% as of Wednesday. LIBOR, which is a common ARM index for subprime loans, was 1.78% at the end of December and 2.62% at the end of November.
The one-year Treasury yield, which the Federal Reserve reported at 0.51% yesterday, was 0.37% at the end of December and 0.90% and the end of November.